In the early 1980s Louisiana-Pacific (LP) Corp. began developing alternatives to lumber for use as home siding. The idea was to develop materials made more efficiently from wood manufacturing by-products and lower-grade wood. These alternative products were intended to be competitive with products that were beginning to increase in market share, such as aluminum and vinyl siding, with a lower price point than conventional wood products.

The siding product created by LP was based on oriented strand board (OSB), a composite product manufactured from wood wafers. Initially, OSB was used primarily for structural support panels in roofs, floors and walls. However, LP soon developed the product for use as exterior siding. Originally, LP called the siding "waferboard," but the company soon decided to market it as "Exterior Inner-Seal Siding" and promoted it as offering the strength and character of plywood without the irregularities that limit plywood's uses. The company also promoted the siding as an environmentally friendly alternative to redwood or cedar siding because it did not use first- or old-growth lumber.

Consumer complaints against LP OSB products began in the early 1990s. The first complaints arose out of the use of OSB panels on the roofs of houses in Florida. During Hurricane Andrew in 1992, many Florida homes lost shingles, exposing the roof panels to the elements. In the aftermath, there were reports that OSB, when used as a roofing substrate, began to deteriorate rapidly. While no one expected most building materials to survive a hurricane, the rapid deterioration of OSB panels after exposure to the heavy rains accompanying it was a factor when consumer complaints arose later on.

Initially, LP responded by offering compensation under its warranty program. If homeowners felt that payments offered under the warranty were insufficient to compensate their damages, the company gave them the option of entering into binding arbitration or pursuing their complaint in court. However, LP soon realized that it could not afford to arbitrate all potential claims. Furthermore, the warranty program did not prevent consumers from bringing lawsuits and did not address the growing tension between LP and its primary customers — the home builders, contractors and developers who also might be held liable in lawsuits brought for damages associated with OSB deterioration.

Despite LP's position that only a minute fraction of siding failed for reasons other than improper maintenance or installation, it received about 30,000 claims under the warranty program. In its required Securities and Exchange Commission (SEC) filings for the year ending 1994, LP indicated that claims were pending involving approximately 1,300 dwellings. It had also "paid approximately $37 million to settle claims. By the end of the first half of 1995, LP had paid an additional $5 million in claims.

Although LP was convinced that it would win all Inner-Seal suits on the merits at trial, to the company's credit, it felt that the best possible outcome was to settle all disputes as quickly as possible.

Two years into the settlement period (June 1998), LP had paid claimants approximately $165 million. Based on these figures, claimants received approximately $4,367 as an average settlement amount. Almost 67,000 inspections had been performed. Of this group, 37,781 claimants received checks.